Fitch puts Wachovia on watch

Fitch Ratings said it placed the AA-/F1+ issuer default ratings of Wachovia Corp. and its subsidiaries on Rating Watch negative in light of continued headwinds facing U.S. consumer asset quality and indications of further meaningful home price deterioration in certain markets.

Other ratings on review include Wachovia's AA- senior long-term debt, A+ subordinated debt, F1+ short-term issuer default rating and short-term debt, A+ preferred stock and B individual rating.

Wachovia built its loan loss reserve by $2 billion in the first quarter. However, Fitch said this represents only about 1.2% of Wachovia's substantial $170 billion residential mortgage portfolio. Included in the portfolio is $121 billion of Pick-A-Pay (option ARM) mortgages, a product that has exhibited more significant deterioration in performance metrics than conventional 30-year or 15-year fixed-rate mortgages for the industry, the agency noted.

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